jueves, 7 de julio de 2011

MONEY

        Money is the tool with human set value in which all humans revolve, being the most essential tool for survival in contemporary times. There are two types of money people work with.

M1 is the physical money like bills coins etc-FED/EU-3%  refers to all of the physical money such as dollar bills and coins. The FED/EU is in charge of this and take control of the money supply. However, physical money only makes up 3% of all money supply.
M2 is virtual money that comes in credit cards or checking accounts. The market takes control of this money supply. Since this money does not really exist, we face an ongoing and progressive debt of a system that only works because we believe in it and have not thought of a better alternative. Virtual money makes up 97% of the money supply.


FED increases and decreases money in market. They manipulate money by:

-Reserve requirement is how much money banks must keep in the vault for every deposit.
Whenever the reserve requirement is low, the money supply increases.
Whenever the reserve requirement is high, the money supply decreases.


-discount rate is the percent at which FED "sells" money to bank.
If they increase the rate, money in circulation decreases.
If they decrease the  rate, money in circulation increases. 
-open market operations are bonds sold by the government such as securities to the public.

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